Many new businesses find it difficult to obtain a loan from a conventional lender. If the principals of a new business own real estate, they may be able to collateralize the properties to generate the working capital needed for start up. Commercial properties, residential properties and more have been used.
If you are considering collateralizing your residential property for a hard money business loan, put the property into a corporate entity before even requesting the loan. You can establish a new entity or use the business entity. Many people prefer to separate the property from another business by establishing a new corporate entity to hold the real estate. Establish a fair market value for rent and pay it. Keep books. Know that if the sole reason you are establishing an entity and transferring the property is to obtain a loan thus circumventing the residential mortgage loan restrictions, your loan will be declined. It’s not the lender that declines the loan - it’s the law.
So prepare in advance to be able to generate capital for a new business. Consult with a business lawyer or business financial mentor, such as those provided by the SBA and other local business support groups before making any arrangements. The experience of seasoned business owners can be invaluable and you should always have competent legal advice before making decisions about property, real or business.
http://www.sba.gov/
http://www.jmgcap.com
Add New Comment
Viewing 2 Comments
Thanks. Your comment is awaiting approval by a moderator.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Add New Comment